Q2 2020 Novocure Ltd Earnings Call
No cure second quarter 2020, <unk> earnings call.
Operator: 2nd Quarter 2020 Earnings Call. At this time, all participant lines are in a listen-only mode.
At this time all participant lines are in listen only mode.
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Ashley Cordova: I would now like to hand the conference over to your host today, Ashley Cordova, Senior Vice President of Finance and Investor Relations. Please go ahead. Good morning, everyone, and thank you for joining us to review Novocure's second quarter 2020 performance. With the management team largely working remotely, we are again conducting today's call virtually. I am joined on the phone by our Executive Chairman, Bill Doyle; our CEO, Asaf Danziger; our CFO, Wilco Gronheisen; Pritesh Shah, our Chief Commercial Officer, and Ellie Benne, our Chief Medical Officer, are also on the call and available for Q&A. The slides presented today can be viewed on our website www.novocure.com by clicking on the link for second quarter 2020 financial results located in the events section on our investor relations page.
I would now like the hand, the topics over to your hosts today.
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Please go ahead.
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Good morning, everyone and thank you for joining us to read the you know we care a second quarter 2020 performing.
With the management team largely working remotely we are again conducting today's call virtually I'm joined on the phone by our executive Chairman Bill Doyle, our CEO I focused on finger, our CFO well could grow nicely.
Protest Shah, our Chief commercial officer, and only Binney, our Chief Medical Officer are also on the call and available for QNX.
The flights presented today can be viewed on our website www dot now the cure dotcom by clicking on the link for second quarter 2020 financial results located in the event section on our Investor Relations page.
Before we start I would like to remind you that our discussions during this conference call will include forward looking statements and actual results could differ materially from those projected and eat steak.
Ashley Cordova: Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements, and actual results could differ materially from those projected in these statements. These statements involve a number of risks and uncertainties, some of which are beyond our control, including those risks and uncertainties described from time to time in our SBC filing. We do not intend to update publicly any forward-looking statement except as required by law. Following our prepared remarks today, we will open the line for questions. Financials for the three and six months ended June 30, 2020 are available in our press release and in our QAngCue, both of which we released earlier this morning. Where appropriate, we will refer to non-GAAP financial measures to evaluate our business. Reconciliations of non-GAAP financial measures to GAAP financial measures are also included in our press release, in the appendix of the supplemental slides accompanying this presentation, and in our Form 8K filed with the SEC today. These materials can be accessed from the investor relations page of our website, www.novocure.com.
These statements involve a number of risk and uncertainties some of which are beyond our control, including those risks and uncertainties described from time to time and our FCC filing.
We do not intend to update publicly any forward looking statements, except as required by law.
Following our prepared remarks today, we will open the line for questions.
Financials for the three and six months ended June Thirtyth, two topping 20 are available in our press release and in our came to both of which we released earlier this morning.
Where appropriate we will refer to non-GAAP financial measures to evaluate our business reconciliations of non-GAAP financial measures to GAAP financial measures are also included in our press release in the appendix of the supplemental slides accompanying this presentation and in our form 8-K filed with the FCC today.
These materials can be accessed from the Investor Relations page of our website www dot near the cure Dot com.
With that I will now turn the call over to Bill Doyle.
Ashley Cordova: With that, I will now turn the call over to Bill Doyle.
Thank you Ashley and good morning, everyone.
William F. Doyle: Thank you, Ashley, and good morning, everyone. At Novocure, we remain focused on our mission to extend survival in some of the most aggressive forms of cancer through the development and commercialization of our life-extending therapy tumor-treating field. Our track record of execution extended into the second quarter of 2020 with sustained commercial momentum, driving strong financial performance, notwithstanding the challenges of doing business during the COVID-19 pandemic. Our team proved that we can adapt to a rapidly changing environment, and we further strengthened our foundation for growth in Q2. We generated a record $116 million in global net revenue and reported a positive EPS of $0.02 per share. And we ended the second quarter with $347 million of cash on hand.
No mature we remain focused in our mission to extend survival and some of the most aggressive forms of cancer through the development and commercialization of our life extending therapy tumor treating fields.
Our track record of execution extended into the second quarter 2020 with sustained commercial momentum driving strong financial performance.
Standing the challenges of doing business during the cold in 19 pandemic.
Our team proof that we can adapt to a rapidly changing in bars.
We further strengthened our foundation for growth in Q2.
We generated a record $116 million involved in that revenue.
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We ended the second quarter with $347 million a cash on hand.
William F. Doyle: Our financial strength allowed funding of increased investments in clinical and product innovation intended to further unlock the potential of the tumor treating fields platform. We believe that the tumor treating fields mechanism of action is broadly applicable to solid tumor cancer. Our fundamental scientific research spans two decades.
Our financial strength, a lot of funding increased investments in clinical product innovation intended to further on bought the potential of the tumor treating fields platform.
We believe the tumor treating fields mechanism of action is broadly applicable to solid tumor cancers.
A fundamental scientific research spends two decades and all of our preclinical research to date tumor treating fields has demonstrated a consistent any mitotic effect.
William F. Doyle: And in all of our preclinical research to date, tumor treating fields have demonstrated a consistent antimyotic effect. Building upon the solid foundation of compelling preclinical evidence, we are executing a strategy to advance tumor treating fields therapy through phase two pilot trials. Phase 3 Pivotal Trials and Phase 4 Post-Marketing Studies across multiple solid tumor cancer indications. Investments supporting the advancement of both our science and technology remain core to our long-term value creation strategy, and there have been several recent notable developments that I would like to highlight today.
Building upon the solid foundation compelling preclinical evidence we are executing a strategy to advance tumor treating fields therapy through phase two pilot trials.
Phase three pivotal trials and phase for post marketing studies across multiple solid tumor cancer indications.
That's not supporting the advancement of both our science and technology remains core to our long term value creation strategy and never been several recent notable developments, but I would like to highlight today.
In July we enrolled the last patient in the happen all the trial a phase two pilot trial studying tumor treating field in combination with troponin in patients with advanced liver cancer tumor treating fields have demonstrated efficacy in vitro and in vivo model.
William F. Doyle: In July, we enrolled the last patient in the HEPA-NOVA trial, a phase two pilot trial studying tumor-treating fields in combination with serapinib in patients with advanced liver cancer. Tumor-treating fields have demonstrated efficacy in in vitro and in vivo models of hepatocellular carcinoma and can be delivered to the abdominal region. In preclinical studies, tumor-treating fields plus serapinib led to reduced viability and clonogenicity of hepatocellular carcinoma cells, as well as increased apoptosis and autophagy in vitro and to a significant reduction in tumor volume in vivo.
Got a cellular carcinoma and can be delivered to the abdominal region.
In preclinical studies tumor treating fields, plus wrapping them led to reduced viability quote carnage in this city.
How to cellular carcinoma cells as well as increased day plot ptosis, an apology in vitro and to a significant reduction in tumor volume in vivo.
William F. Doyle: Our preclinical data inform the design of the Phase II HEPA-NOVA trial. HEPA-NOVA was designed to detect an overall response rate of 20 percent in 25 patients treated with tumor-treating fields, compared to a 4.5 percent overall response rate calculated from historical control. We expect final data collection six months from the last patient enrollment and look forward to seeing the results in early 2021.
Our preclinical data inform the design of the phase two happen all the trial.
No that was designed to detect and overall response rate, 20% in 25 patients treated with tumor treating seals compared to a 4.5% overall response rate calculated from historical controls.
We expect final data collection six months from the last patient enrollment and look forward to seeing the results in early 2021.
Beyond our internal development efforts tumor treating fields therapy is up increasing interest to the broader scientific and clinical research communities.
William F. Doyle: Tumor Treating Fields Therapy is of increasing interest to the broader scientific and clinical research community. In July, we announced a clinical trial collaboration agreement with MSD, a trade name of Merck, to develop tumor treating fields together with the anti-PD-1 therapy Keytruda for the treatment of first-line, non-small-cell lung cancer. Preclinical studies suggest the use of tumor-treating fields, together with anti-PD-1 therapy, can augment the immune response, resulting in improved tumor control. And we are currently studying the combination of tumor-treating fields and anti-PD-1 therapy as a second-line treatment for stage 4 non-small cell lung cancer in our lunar trial. In collaboration with Merck, we will expand our research on lung cancer to study the combination of tumor-treating fields concomitant with Keytruda for first-line treatment at Stage 3 non-small cell lung cancer in a Phase 2 pilot study designed to accrue approximately 66 patients in the United States. Objective response rate is the primary endpoint of the study, and secondary endpoints include overall and progression-free survival. Keynote 36 is expected to begin in the second half of 2020.
In July we announced a clinical trial collaboration agreement with Amnesty a trade name of Merck to develop tumor treating fields together with the anti PD one therapy keytruda for the treatment first line non small cell lung cancer.
Preclinical studies suggest the use of tumor treating fields together with anti PD, one therapy can augment the immune response, resulting in improved tumor control.
And we are currently studying the combination of tumor treating fields and anti PD one therapy. That's a second line treatment per stage for non small cell lung cancer in our lunar trial.
In collaboration with Merck, we will expand our research in lung cancer to study the combination of tumor treating fields and continent Keytruda first line treatment of stage three non small cell lung cancer in a phase two pilot study designed to accrue approximately 66 patients in the United States.
Objective response rate is the primary endpoint of study.
Secondary endpoints include overall in progression free survival.
She knows 36 is expected to begin in the second half of 2020.
William F. Doyle: We look forward to generating clinical data from this important combination study in first-line non-small-cell lung cancer with a global leader in oncology. These important achievements underscore our unwavering focus on advancing our clinical development strategy, both internally and with external collaboration. We remain confident of the potential to significantly expand the addressable market for tumor treating fields with readouts of key data sets from the six indications in our clinical pipeline anticipated over the next three years. Beyond clinical development, we are working to improve our therapy and how we deliver therapy. We continue to expand our product development programs to deliver technological enhancements intended to improve our therapies. Efficacy and our products' ease of use.
We look forward to generating clinical data from this important combination study enforceable falling non small cell lung cancer with a global leader and a call.
These important achievements underscore our unwavering focus on advancing clinical development strategy, both internally and with external collaborators, we remain confident of the potential to significantly expand the addressable market for tumor treating fields with readouts of key datasets from the six indications our clinical pipe.
Flying anticipated over the next three years.
The on clinical development, we're working to improve our therapy and our therapy delivery systems, we continue to expand product development programs to deliver technology enhancements intended to improve our therapies.
Efficacy and our products ease of use.
William F. Doyle: Our product development organization includes dedicated teams focused on advancements of the tumor treating field generator, arrays, and software applications intended to improve patient outcomes in the aggressive cancers that we treat. Just over a year ago, an EF14 post hoc analysis published in the Red Journal provided a definition of dose for tumor treating fields and demonstrated that higher doses improve survival in newly diagnosed GBM patients. The dose response for tumor treating fields is driven by total energy delivery, which is a function of time-on therapy and electric field intensity delivered to the tumor bed. The Red Journal analysis was pivotal in guiding our product development efforts in tumor treating field dosimetry and treatment planning. In the second quarter, our software applications team completed the initial development of a new treatment planning software package called Max, which seeks to optimize the tumor-treating field's dose delivered to GBM patients.
Our product development organization includes dedicated teams focused on advancements of the tumor treating fields generator arrays and software applications intended to improve patient outcomes in the aggressive cancers have retreat.
Just over a year ago and he EF 14 post hoc analysis published in the Red Journal provided the definition of dose for tumor treating fields and demonstrated that higher doses improve survival newly diagnosed GBM patients.
The dose response for tumor treating fields is driven by total energy delivered.
Which is a function of time on therapy and electric field intensity delivered to the tumor debt.
The Red Journal analysis was pivotal guiding our product development efforts in tumor treating fields dosimetry and treatment planning.
In the second quarter, our software applications team completed initial development, the new treatment planning software package called Maxpoint.
Which seeks to optimize the tumor treating fields dose deliver to GBM patients.
Maxpoint will allow physicians to estimate the field intensity deliver to an individual GBM patients tumor and will provide a tool to customize that patients treatment plan and transducer array layouts based on algorithms that compute the field impact on the different brain tissues.
William F. Doyle: MaxPoint will allow physicians to estimate the field intensity delivered to an individual GBM patient's tumor and will provide a tool to customize that patient's treatment plan and transducer array layouts based on algorithms that compute the field's impact on the different brain tissues. Configuration of the transducer arrays has always been an essential factor in determining the field intensity delivered to the tumor. And we believe MaxPoint will be an important product enhancer to help account for each GBM patient's individual characteristics when determining the optimal tumor-treating field's dose. We are preparing for a beta deployment of MaxPoint with a select number of radiation oncology partners later this year. Our array development team is undertaking multiple projects to advance our array technology. The Optune system currently delivers tumor-treating fields therapy for the treatment of GVM using four transducer arrays with nine ceramic disks each.
Configuration of the transducer arrays has always been an essential factor in determining tumor treating fields intensity deliver.
And we believe Maxpoint will be an important product enhancement.
The count for each GBM patients individual characteristics when determining the optimal tumor treating fields dose.
Okay airing for a beta deployment of Maxpoint with a select number of radiation oncology partners later this year.
Our redevelopment team is undertaking multiple projects to advance our array technologies.
Tim system currently delivers tumor treating fields therapy for the treatment of GBM using for transducer race with nine ceramic just each.
The increase field intensity nobody here decide high intensity arrays with 14 ceramic yes, each for use in the E. F 33 study.
William F. Doyle: To increase field intensity, Novocure designed high-intensity arrays with 14 ceramic disks each for use in the EF33 study. Increasing the surface area of the array is expected to enable delivery of higher field intensities while maintaining the treatment's safety profile. Last week, we launched a Phase II pilot study to test the incremental survival benefit of delivering tumor-treating fields with high-intensity arrays in 25 patients with recurrent GBM. The EES-33 study is designed to determine if tumor-treating fields delivered at 200 kilohertz with high-intensity arrays prolong progression-free survival compared to a historic control using standard arrays. ES33 is intended to measure whether high-intensity arrays can extend median progression-free survival by approximately two months, equating to a hazard ratio of 0.6. We expect final data from the study in 2022, at which point we will determine the appropriate regulatory pathway for potential commercial use.
Creasing the surface area be array is expected to enable delivery of higher field intensities, while maintaining the treatments safety profile.
Last week, we launched a phase two pilot study to test the incremental survival benefit of delivering tumor treating fields with high intensity arrays in 25 patients with recurrent GBM.
Yes, 33 study is designed to determine if tumor treating fields deliberate at 200 kilohertz with high intensity arrays prolongs progression free survival compared to a historic control using standard rates.
Yes, 33 is intended to measure whether high intensity arrays can extend median progression free survival by approximately two months equating to a hazard ratio of 0.6, we expect final data from study and 2022.
Which point, we will determine the appropriate regulatory pathway potential commercial use.
In parallel theory development team is working on several other initiatives intended to further advance our array technology, including potential non ceramic array.
Our increased focus on product development is central to our mission to extend cancer survival and we're excited to highlight these programs as they progress.
William F. Doyle: In parallel, the Array Development Team is working on several other initiatives intended to further advance our array technology, including a potential non-ceramic array. Our increased focus on product development is central to our mission to extend cancer survival, and we are excited to highlight these programs as they progress. We plan to host a research and development day for analysts and investors in November to highlight progress across our development pipeline and to introduce areas of internal and external focus in our translational research. We remain optimistic about the role tumor treating fields can play in advancing cancer care across all of our pipeline indications. And we remain optimistic in our ability to continue to improve the patient benefits of tumor treating fields therapy. The fundamental prospects of our business are as strong as ever, and we are determined to advance our priorities to unlock the long-term potential of our proprietary platform. With that, I will turn the call over to Asaf to share his perspective on the second quarter.
We plan to host a research and development day from analyst and investors in November highlight progress across our development pipeline and introduce areas of internal and external focus in our translational research.
We remain optimistic about the role tumor treating fields can play in advancing cancer care across all of our pipeline indications and we remain optimistic and our ability to continue to improve the patient benefits of tumor treating field therapy.
Fundamental prospects of our business are as strong as ever and we are determined to advance our priority to unlock the long term potential of our proprietary platform.
With that I will turn the call over to a soft the share his perspective on the second quarter.
Uh huh.
Thank you Bill before I share an update on OCO measure progress in the quarter I want to take a moment to review corporate 19 impact as they remain top of mind as we noted last quarter. The aggressive concept. We treat did not slow we cover 19, why do we have seen some ABS inflows inpatient volumes in specific.
Regions. The pandemic did not have a material adverse effect on our commercial business, our global supply chain Oh financial results for the second quarter based on what we know today, we do not anticipate immaterial impact going forward.
Asaf Danziger: Thank you, Bill. Before I share an update on our commercial progress in the quarter, I want to take a moment to review COVID-19 impacts as they remain top of mind. As we noted last quarter, the aggressive cancers we treat do not slow with COVID-19. While we have seen some absent flows in patient volumes in specific regions, the pandemic did not have a material adverse effect on our commercial business, our global supply chain, or our financial results through the second quarter. Based on what we know today, we do not anticipate any material impact going forward.
We did make adjustments to our business in response to covert 19. For example, we implemented multiple future engagement tools and programs to maintain connections with our patients has kept professionals and partners around the world, we respect or institutional restrictions on external visitors and the.
Individual wishes will follow patients and caregivers where possible our field based teams are starting to return to in person visit in certain regions.
With respect to a pipeline than anticipated timing of final data from our ongoing clinical trials is on change from the update provided in Q1.
Asaf Danziger: We did make adjustments to our business in response to COVID-19. For example, we implemented multiple virtual engagement tools and programs to maintain connections with our patients, healthcare professionals, and partners around the world. We respect all institutional restrictions on external visitors and the individual wishes of our patients and caregivers.
Our teams continue to make progress enrolling patients at existing sites and to treat enrolled clinical trial patients in all of our ongoing clinical trials.
We are working closely with institutions local authorities and contract research organization to maintain engagement and we'll continue to adapt oh planes as needed to advance other clinical development priorities.
Asaf Danziger: Where possible, our field-based teams are starting to return. With respect to our pipeline, the anticipated timing of final data from our ongoing clinical trials is unchanged from the update provided in Q1. Our teams continue to make progress enrolling patients at existing sites and treating enrolled clinical trial patients in all of our ongoing clinical trials. We are working closely with institutions, local authorities, and contract research organizations to maintain engagement and will continue to adapt our plans as needed to advance our clinical development priorities. We believe the value of the TTFields platform, our direct-to-patient business model, and the long-term potential of our business remain intact. This is in large part due to the focus and drive of the entire organization, and I have never been more proud of the team's dedication to our mission.
We believe the value of the T.D. fields platform, our direct to patient business model and the long term potential of our business remain intact. This is in large part due to the focus and drive over the entire organization and I have never been more probably over the team's dedication to our mission.
Now turning to the specifics of our quarterly performance.
Q2 was another strong quarter for an overview I will GBM business delivered a record $160 million in global net revenues up 14% vessels Q1 2020.
We ended the second quarter with nearly 3300 active patients on therapy and increase of one another and 83 patients versus the prior quarter, adding to the more than 16000 patients treated to date globally.
Asaf Danziger: Now, turning to the specifics of our quarterly performance, Q2 was another strong quarter for Novocure. Our GBM business delivered a record $116 million in global net revenues, up 14% versus Q1 2020. We ended the second quarter with nearly 3,300 active patients on therapy, an increase of 183 patients versus the prior quarter, adding to the more than 16,000 patients treated to date globally. We view geographic expansion as one of multiple levels to drive near-term growth.
We view geographic expansion as one of multiple levers to drive near term schools in May Optune was approved by the China National medical products of the ministration in combination with Temozolomide for the treatment of patients with newly diagnosed GBM and also as a monotherapy for the treaty.
Men of patients with recurrent GBM disapproval represents the first treatment advance for GBM patients in China in over 15 years, highlighting the differentiation of Optune into anything GBM. The approval also extends the reach 50 defeated to the worlds largest patient population we.
Asaf Danziger: In May, Optin was approved by the China National Medical Product Administration in combination with termozolomide for the treatment of patients with newly diagnosed GBM and also as a monotherapy for the treatment of patients with recurrent GBM. This approval represents the first treatment advance for GBM patients in China in over 15 years, highlighting the differentiation of Optin in treating GBM. The approval also extends the reach of ttFields to the world's largest patient population, with more than 45,000 GBM cases diagnosed each year. I would like to recognize the joint efforts of XyLab and Novocure teams that supported this achievement. We look forward to continuing to advance the TTFields platform in Greater China through our partnership with ZEIT. Moving to other expansion opportunities, we are currently seeking to obtain CE certification for OptinLua in the European Union. With this approval, we can begin to broaden access for patients diagnosed with MPM in our active markets within the EU. In the US, there are now over 100 physicians certified to prescribe OptinLua to MPM patients at more than 50 cancer treatment centers across the country.
More than 45000, GBM cases diagnosed each year.
I would like to recognize the joint efforts well Society lab and novel kill teams. That's supported this achievement.
We look forward to continuing to advance the DTC was blocks from in greater China through our partnership with I.
Moving to other expansion opportunities, we accomplished seeking to obtain see certification for Optune Lula, India will pin Union.
With this approval, we can begin to broaden access for patients diagnosed with M. P. M. You know active markets within the E.
In the U.S., Yeah, no over 100 physicians certified to prescribe ops in lieu of two NPM patients at more than 50 console treatment centers across the country.
I want to reiterate how proud I am hopeful outperformance this quarter, a testament to the focus and drive all novocure colleagues to those colleagues listening on the call today. Thank you for all that you do in support of follow a patient full admission.
With that I will turn the call over to one cool to discuss all financial results.
Thank you Melissa.
No cure sustained commercial momentum delivered strong financial performance in a second quarter, and we remain well positioned to advance our strategic priorities and twentytwenty.
Asaf Danziger: I want to reiterate how proud I am of our performance this quarter, a testament to the focus and drive of all Novocure colleagues. To those colleagues listening on the call today, thank you for all that you do in support of our patient forward mission. With that, I will turn the call over to Wolko to discuss our financial results. Thank you, Asaf.
I keep the end business delivered second quarter net revenues of $160 million, representing 34% growth versus the second quarter of 2019.
Our year over year revenue growth was driven both by the 20% increase and activation antibody, 12% improvement the average net revenues booked per activation.
The increase in revenue per patient benefited from continued improvement in U.S. reimbursement rates.
Wilco Gronheisen: Novocure's sustained commercial momentum delivered strong financial performance in the second quarter, and we remain well positioned to advance our strategic priorities in 2020. Our GBM business delivered second quarter net revenues of $160 million, representing 34% growth versus the second quarter of 2019. Year-over-year revenue growth was driven both by a 20% increase in active patients and by a 12% improvement in the average net revenue booked per active patient. The increase in revenue per patient benefited from continued improvements in U.S. reimbursement. Specifically, we recognized $11 million in second quarter net revenues from Medicare fee-for-service beneficiaries built under the positive coverage policy established on September 1st, 2019. This was our third full quarter progressing through the administrative ramp-up with Medicare, and we have gained a good understanding of how to ensure timely processing of clean plans. Approximately 60% of our Medicare active patients are currently eligible for coverage under the policy that they started therapy under after coverage went into effect in September 2019.
Specifically, we recognize the $11 million in second quarter net revenues for Medicare fee for surface beneficiaries built under the positive garbage policies established on September 1st 2019.
This was a third full quarter progressing through the administrative ramp up with Medicare and we have gained a good understanding of how come insured timely processing of clean claims.
Approximately 60% of our Medicare Activations are currently eligible for coverage on the policy that they started therapy ex the coverage went into effect in September 2019.
Continues to gain experience processing claims that required an appeal and expect we will getting sufficient experience over the next two quarters to recognize additional revenue from these Medicare beneficiaries.
Moving down to BNL gross profit in the second quarter was $19 million, reflecting a 78% gross margin.
Gross margin continues to benefit from ongoing efficiency initiatives at increasing scale.
Our capital allocation priorities are unchanged and we continue to invest in innovation as part of our long term value creation strategy.
That's the $30 million, an R&D to support the continued advancement tumor treating people science and technology in a second quarter, a 54% versus the second quarter 2019.
This was primarily due to an increase in clinical trial and personnel expenses for our phase three pivotal phase for both marketing trials that increase in development that personnel expenses to support a product development programs increased investments in preclinical research and the extension of our medical Affairs outreach.
We expect R&D expenses will continue to increase in future quarters, as we advance our preclinical clinical product development programs and our efforts to increase acceptance of tumor targeting fields across the global scientific community.
Wilco Gronheisen: We continue to gain experience processing claims that require an appeal and expect we will gain sufficient experience over the next two quarters to recognize additional revenue from these Medicare beneficiaries. Moving down to P&L, gross profit in the second quarter was $19 million, reflecting a 78% gross margin. Crossmarking continues to benefit from ongoing efficiency initiatives and increasing scale.
Our second quarter, DNA expenses were $54 million up 20% versus the second quarter 2019, driven primarily by increased personnel cost to support our role in commercial business in the reimbursement efforts.
Slight increase in marketing expenses related to the launch of up to Lula.
Our net income was $2 million, but two cents in earnings per share representing a fourth consecutive quarter of profitability.
Wilco Gronheisen: Our capital allocation priorities haven't changed, and we continue to invest in innovation as part of our long-term value creation strategy. We invested $30 million in R&D to support the continued advancement of tumor-treating field science and technology in the second quarter, up 54% versus the second quarter of 2019. This was primarily due to an increase in clinical trial and personnel expenses for our Phase 3, Pivotal, and Phase 4 post-marketing trials, an increase in development and personnel expenses to support our product development programs, increased investments in preclinical research, and the expansion of our medical affairs outreach. We expect R&D expenses will continue to increase in future quarters as we advance our preclinical, clinical, and product development programs and our efforts to increase acceptance of tumor treating fields across the global scientific community.
We also be evaluated operating performance based on adjusted EBITDA, a non-GAAP measurement of earnings before interest taxes, depreciation amortization a share based compensation.
We believe this is an important metric is it removes the impact of earnings attributable to our capital structure tax rate immaterial noncash items, specifically share based compensation, but its best reflects the financial failure generated by our business.
Adjusted EBITDA increased by 64% to $28 million for the three months ended June Thirtyth 2020 from 17 million for the same buried in 2019.
This improvement in fundamental financial performance was driven by topline growth a disciplined management of expenses.
We ended the quarter were $347 million in cash cash equivalents shorten investments an additional $15 billion from the prior quarter.
He believes that our financial strength, coupled with our cash on hand provides us with stability and flexibility to fund both near term and long term strategic priorities.
Wilco Gronheisen: Our second quarter SG&A expenses were $54 million, a 20% increase in the second quarter of 2019, driven primarily by increased personnel costs to support our growing commercial business and reimbursement efforts and by an increase in marketing expenses related to the launch of OptumLua. Our net income was $2 million, with 2 cents in earnings per share, representing our fourth consecutive quarter of profitability. We also evaluate our operating performance based on adjusted EBITDA, a non-gap measurement of earnings before interest, taxes, depreciation, amortization, and share-based compensation. We believe this is an important metric as it removes the impact of earnings relating to our capital structure, tax rate, and material non-cash items, specifically share-based compensation, and it best reflects the financial value generated by our businesses. Adjusted E This improvement in fundamental financial performance was driven by top-line growth and disciplined management of expenses. We ended the quarter with $347 million in cash, cash equivalents, and short-term investments, an additional $15 million from the prior quarter.
Before I hand, the call over to the operator for Q1 day I would like to thank every one of the phone for their continued interest in no particular.
Our results in a second quarter highlighted a track record of execution were sustained commercial momentum drove another strong financial performance. The funded increased investments in clinical that product innovations intended to unlock future Phil.
We believe that fundamental prospects of our business are strong.
And we remain confident in our team our strategy and the long term potential of tumor treating feels platform to extend survival in some of the most aggressive forms of cancer.
Thank you for your time. This morning, now what it will turn to call back over to the operator for questions.
As a reminder to ask that question you only need to press Star then one on your telephone to withdraw your question. Please press the pound key.
Our first question comes on the line of Gregg Gilbert with Suntrust. Your line is now open.
Thanks, Good morning, I've, a couple bill it's good to see tangible progress at the on the higher intensity approach the starting that mean that youve solved the material science challenges that we've discussed in the past that we're kinda limiting.
Before and my second question is on the Merck collaboration which was good to see could you provide a little background on how that dialogue has progressed overtime was there a key piece of data or development that.
Pushed you in them.
Off the fence and in terms of starting.
And lastly can you provide any more color about that study in terms of the types of patients that would and would not be part of it whether that's cut point for PDL, one positivity screens non screams or any other color you're willing to provide thank you.
Wilco Gronheisen: We believe that our financial strength coupled with our cash on hand provides us with stability and flexibility to fund both near-term and long-term strategic priorities. Before I hand the call over to the operator for Q&A, I would like to thank everyone on the phone for their continued interest in Novocure. Our results in the second quarter highlight a track record of execution where sustained commercial momentum drove another strong financial performance that funded increased investments in clinical and product innovations intended to unlock future value. We believe that the fundamental prospects of our business are strong, and we remain confident in our team, our strategy, and the long-term potential of the tumor treating fields platform to extend survival in some of the most aggressive forms of cancer. Thank you for your time this morning. Now, I will turn the call back over to the operator for questions.
Sure. So so Greg good morning, Thanks, as always for your interest I just want to date before we get started that we are completely dispersed around the world. So I am going to be a little directive.
I asked people to let to jump in an answer, but but let me start with the high intensity.
As I mentioned during the prepared remarks.
It's absolutely clear based on our preclinical research and all of our analyses of our clinical work to date and when I say that recall when we treat a patient we know exactly where the arrays are being place based on the rate placement software and.
We have high resolution number ice for all the patients. So we know if you will the configurations of the tissues in their brain and the locations with their tumors. So we're able to make very.
<unk> electrical field, Matt on a patient by patient basis.
Operator: As a reminder, to ask a question, you will need to press star and then 1 on your telephone. To withdraw your question, please press the pound key. Our first question comes from the line of Greg Gilbert with SunTrust. Your line is now open.
What we've seen and what was published.
In the Red Journal after a very painstaking analysis.
Was.
What makes sense, but what was proven is that tumors that receive a higher intensity.
Up tumor treating fields have a much better.
Gregory Daniel Fraser: Thanks. Good morning. I have a couple.
Gregory Daniel Fraser: Bill, it's good to see tangible progress on the higher intensity approach.
Overall survival, then tumors that that have a lower dose.
So what does that mean practically.
Gregory Daniel Fraser: Does starting that mean that you've solved the material science challenges that we've discussed in the past that were kind of limiting? And my second question is about the Merck collaboration, which was good to see. Could you provide a little background on how...
And why haven't we turned up the field intensity before the reason is that with our commercial system, which is the first arrays that we developed now well over a decade ago.
Gregory Daniel Fraser: How that dialogue has progressed over time; was there a key piece of data or a development that...
As we turn up the intensity.
We generate seat under the ceramic yes.
Gregory Daniel Fraser: Pushed you and them, you know, off the fence in terms of starting. And lastly, can you provide any more color about that study in terms of the types of patients that would and would not be part of it, whether that's cut point for PD-L1 positivity squeams non-squeams or any other color you're willing to?
On the scout and we have to limit the intensity as the temperature goes up.
There are a number and our teams are working on a number of engineering solutions for them.
The first.
What's to just increase the number of those Jeff.
And that's what we described so if you will this is less of a material science solution.
William F. Doyle: Sure. So, Greg, good morning. Thanks, as always, for your interest. I just want to state before we get started that we are completely dispersed around the world, so I am going to be a little directive, you know, when I ask people to jump in and answer. But let me start with high intensity.
More of a Oh, I've engineering solution to spread that.
Intensity out among 14 desks rather than among nine.
This allows us this was the fastest path.
William F. Doyle: As I mentioned during the prepared remarks, it's absolutely clear based on our preclinical research and on all of our analyses of our clinical work to date, and when I say that, recall when we treat a patient, we know exactly where the arrays are being placed based on the array placement software and we have high resolution MRIs for all the patients, so we know, if you will, the configurations of the tissues in their brain and the locations of their tumors, so we're able to make very specific electrical field maps on a patient by patient basis, and what was seen and what was published in the Red Journal after a very painstaking analysis was What makes sense, but what was proven, is that tumors that receive a higher intensity of tumor-treating fields have a much better overall survival than tumors that have a lower dose. So what does that mean practically, and why haven't we turned up the field intensity before? The reason is that with our commercial system, which is the first arrays that we developed now well over a decade ago, as we turn up the intensity, we generate heat under the ceramic disk. [inaudible]
To allow us to entered the clinic with the system. We did mentioned in the script that we have a number of other approaches that if you will are more elegant.
And we'll deliver comfort.
As well as higher intensity that I.
I believe will be a in the clinic in the future, but this is the I think a great.
Example of how we can translate.
First of all fundamental science.
Right into the clinic in a in a relatively short period of time.
On your second question was on Merck.
What I can say here is that the the Merck science teams and the November sure Science teams collaborated on the design, though it's trial, we started by presenting to the at the highest levels the Merck science team.
Our.
Work that both preclinical and.
And early clinical showing the potential benefits of combining.
[music].
Our therapy tumor treating field therapy with any PD one therapy.
I would say you know as obvious by the second we move forward they saw the potential of this.
William F. Doyle: of an engineering solution to spread that intensity out among 14 disks rather than among nine. And this allows us, this was the fastest path to allow us to enter the clinic with the system. We did mention in the script that we have a number of other approaches that, if you will, are more elegant and will deliver comfort as well as higher intensity that I believe will be in the clinic in the future. But this is, I think, a great example of how we can translate, first of all, fundamental science into the clinic in a relatively short period of time. Your second question was about Merck. What I can say here is that the Merck science teams and the Novocure science teams collaborated on the design of this trial.
They worked very closely with us to design the trial protocol.
Clearly lung cancer is there is probably the Merck companies, most important franchise and and they wanted to put tumor treating field in lung cancer.
So this was a true collaborative effort and where we're really excited to get this trial kicked off.
Thanks, and any color on the patient makeup PDL P PDL, one positivity cut points or.
Screens not twins.
Oh, we do you have any.
Detail you want to share on that.
Sure.
Thank you for the call and the question the AD.
36, stellar population, it's going to cover advanced or metastatic infer thoracic non small cell lung cancer, a patient they have to be a PD Edwin tumor, where we put in a proportion score has to be a 1% or higher.
William F. Doyle: We started by presenting to the highest levels, the Merck science team, our test results, work that both preclinical and early clinical shows the potential benefits of combining Power Therapy, Tumor Treating Field Therapy with Anti-PD-1 Therapies. I would say, as is obvious by the fact that we moved forward, they saw the potential of this. They worked very closely with us to design the trial protocol. Clearly, lung cancer is probably the Merck company's most important franchise, and they wanted to put tumor treating fields in lung cancer. So this was a true collaborative effort, and we're really excited to get this trial kicked off.
Thanks Elliot Q.
Thank you.
Our next question comes on the line of Larry listen with Wells Fargo. Your line is now open.
Good morning, guys. Thanks for taking the question one for will go for one for Bill I'll ask them. Both upfront just will go on the piano any color that.
The gross margin it was quite strong this quarter.
This is there's still room for improvement and the gross to net by our math in Q2 was about 55%.
Where do you see that go and or revenue per patient and talked about it beat up 12%, where do you see that going in and for Bill.
William F. Doyle: Thanks in any color on the patient makeup, PDL1 positivity cut points or squeams, non-squeams.
Yes can you talk about trial enrollment and if it's picked off that you've been able to open new sites, yet and just lastly on clinical trials bill on the interim analyses.
Gregory Daniel Fraser: Eli, do you have any more detail you want to share on this?
Ellie Benne: Sure, thank you for the call and the question. The Keynote 36 study of population is going to cover advanced or metastatic infrathoracic non-small cell lung cancer patients. They have to be PD-L1 positive tumors, what we call the proportion score, has to be 1% or higher.
Do you expect in 2021 any color at this point, whether those will be in the first half or second half or the carried into those analyses. Thanks for taking the questions guys.
Let me kick it off good morning, Larry Wilco here.
Ellie Benne: Our next question comes from the line of Larry Wilson with Wells Fargo. Your line is now open. Good morning, guys.
Two great questions as always first of all gross margin as you know we've been committed to improving our figure efficiency operating leverage.
Over the less number of quarters and cost of goods sold is one aspect of that.
Larry Wilson: Thanks for taking the question. One for Wilco and one for Bill. I'll ask them both up front.
Very pleased with the improvement from 60% to 76% to 78% in in the second quarter, that's something to do with the with the revenue pick up of course, but also as a lot to do with our commitment to finding ways to become more efficient in our in our distribution order fulfillment process as well as some further improve.
Larry Wilson: Just Wilco, on the P&L, any color, you know, on the gross margin, it was quite strong this quarter. You know, is there still room for improvement? And the gross to net, by our math, in Q2 was about 55%. Where do you see that going? Or revenue per patient. We talked about it being up 12%. Where do you see that going? And for Bill, you know, can you talk about trial enrollment and whether it's picked up, if you've been able to, you know, open new sites yet? And just lastly, on clinical trials, Bill, on the interim analyses that you expect in 2021, any color at this point on whether those will be in the first half or second half or the cadence of those analyses? Thanks for taking the questions, guys.
In.
Let's say purchasing leverage I would expect as we said on earlier calls to see that gross market to go up a little bit further.
Unclear right now to what extent, but the 78 I think as a comfortable platform with some potential upside.
With respect to gross to net.
We mentioned during the script that we see continued improvement in our reimbursement for activation as one of the drivers of our revenue in the increase in the second quarter as well one of the aspects. There is because we know can recognize more and more than Medicare revenue.
We mentioned the clean that claims improvement. We also believe that that's what and Dunkin' claims we be developed a process that.
That this will enable us to be successful at a significant rate in these particular claims with 55% now with with those further improvements and get administrative ramp up that we talked about in the last few quarters, we expect that to last for another couple of quarters, but then we should see the Medicare come to fruition.
Wilco Gronheisen: Let me kick it off. Good morning, Larry Wilco here. Two great questions, as always.
Wilco Gronheisen: First of all, gross margin. As you know, we've been committed to improving our efficiency operating leverage over the last number of quarters, and cost of goods sold is one aspect of that. We're very pleased with the improvement from 76% to 78% in the second quarter. That has something to do with the revenue pickup, of course, but it also has a lot to do with our commitment to finding ways to become more efficient in our distribution order fulfillment process as well as some further improvement in, let's say, purchasing leverage. I would expect, as we said in our earlier calls, that gross margin to go up a little bit further. It's unclear right now to what extent, but 78% I think is a comfortable platform. With respect to growth to net, we mentioned during the script that we see continued improvement in our reimbursement per active patient as one of the drivers of our revenue increase in the second quarter as well.
So thanks for calling I'll just pick up the.
The tail end of your question.
Larry and then turn it over to Ellie, but with respect to timing of of trial completion. So we haven't changed tower.
Estimates of trial completion, we don't.
Further differentiate first quarter second quarter third quarter in terms of.
Policies and Elie, maybe a few have any.
Color Alan.
The trial opening or side opening that sort of thing to share.
Got it thank you bill.
I would say that we have seen a what we call that clinical trial environmental environment does have a decision. We already started seeing early signs of a clinical trial reopening in certain geographies.
You know we successfully lounge, yes 33.
Wilco Gronheisen: One of the aspects there is that we now can recognize more and more Medicare revenue. We mentioned the clean claims improvement. We also believe that for the non-clean claims, we have developed a process that will enable us to be successful at a significant rate in these particular claims. We're at 55% now with those further improvements and the administrative ramp-up that we talked about in the last few quarters. We expect that to last for another couple of quarters, but then we should see Medicare come to full fruition.
Intense their ray.
We believe the distance issued to stable clinical appropriate so really very well be base on regional and trials specifically.
Factors you know we competed very strong engagement with the institution local authorities and see our roads with.
Clinical trial and the environment reopening in different geographies. So I think we have a.
Sort of.
Takeover the issues that you know cobi presented to us and we are pushing forward.
Mentioned I'm extremely.
William F. Doyle: So thanks, Suoko. I'll just pick up the tail end of your question from Larry and then turn it over to Ellie, but with respect to timing of trial completion. So we haven't changed our estimates of trial completion. We don't further differentiate first quarter, second quarter, and third quarter in terms of analysis.
Proud of what the teams have done we have pushed through and we're seeing the benefits.
In our enrollment and opening new site.
Thank you so much for taking the questions guys.
Thank you. Our next question comes from the line of Ajay Kumar with Evercore. Your line is now open.
Congrats on a nice screens here.
William F. Doyle: And Ellie, maybe, you know, if you have any color on trial opening or site opening, that sort of thing to share.
Well, maybe on a on the off the new non small lung cancer trial.
The first line therapy I'm curious just given the details I won't happen overnight on a on.
Ellie Benne: Thank you, Bill. I would say that we have seen what we call clinical trial environmental stabilization. We have already started seeing early signs of clinical trial reopening in certain geographies. You know, we successfully launched the EF33, you know, high-intensity array.
Analysis, showing an objective response rate of 20% versus baseline.
Is there a similar metric here.
For the first line.
Ellie Benne: We believe that this transition to stable clinical trials will really be based on regional and trial-specific factors. You know, we continue very strong engagement with the institution, local authorities, and CROs, with the clinical trial environment reopening in different geographies. So, I think we have sort of taken over the issues that, you know, COVID presented to us, and we are, you know, pushing forward. And, like Asaf mentioned, I'm extremely...
Trial on the non small lung cancer side, what we should be expecting.
So.
Good morning.
VJ and it's good to hear from you. Thanks.
For your question so.
Collaboration with Merck expands tumor treating fields for search and first line treatment of stage three non small cell lung cancer.
Versus as second line treatment for stage for non small cell lung cancer and our lunar trial. So it really.
Ellie Benne: I'm proud of what the teams have done. We have pushed through, and we're seeing the benefits in our enrollment and opening new sites. Thank you so much for taking the questions, guys. Thank you. Our next question comes from the line of Vijay Kumar with Evercore.
And I think if you think that this in combination with our work and Muse affiliate really points to our development of.
Have a franchise.
And in this area. The trial is designed to enroll 66 patients.
Expect to start.
Soon.
And the overall response rate is a well established surrogate endpoint and overall survival and PFS in phase two studies. So so we think it's appropriate I will say, but theres no relationship between Epanova and.
Vijay Kumar: Your line is now open. Congratulations on a nice sprint here. Bill, maybe on the new non-small lung cancer trial as a first-line therapy. I'm curious, just given the details from HEPANOVA on your analysis showing an objective response rate of 20% versus baseline of four and a half, is there a similar metric here for the first-line trial on the non-small lung cancer site? What should we be expecting?
Yes, 33, we look if the data in each.
Hi indication.
In order to develop the statistics.
For each individual trial.
And again this one was.
This this one was designed with Merck scientist.
This was not designed by ourselves and and we have not yet disclosed the further statistical considerations in this trial [noise].
William F. Doyle: So, good morning, Vijay, and it's good to hear from you. Thanks for your question. Our collaboration with Merck expands tumor-treating fields research into first-line treatment of stage 3 non-small-cell lung cancer versus second-line treatment for stage 4 non-small-cell lung cancer in our lunar trial. So really, and I think if you think of this in combination with our work in mesothelioma, you know, it really points to our development of a franchise in this area. The trial is designed to enroll 66 patients. We expect to start soon, and the overall response rate is a well-established surrogate endpoint for overall survival in PFS in phase 2 studies, so we think it's appropriate. I will say that there's no relationship between HEPAnova and EF33. We look at the data in each indication in order to develop the statistics for each individual trial, and again, this one was... This one was designed with Merck scientists; it was not designed by ourselves, and we have not yet disclosed the further statistical considerations in this trial.
Understood and then one now on the financials site.
On the revenue beat.
The main drivers here it seems.
Let the U.S. reimbursement.
Revenue per patient per month that stepped up and now clearly actually patients that continues to grow plus 20%.
So under US reimbursements I, you see me any step up and commercial reimbursement rates are not personally as lives covered I'm curious, what's driving that none on the ACO patient side.
You know adds up the compliance rates improve should we now just be looking at a strong double digit actual patients or look for the foreseeable future. Thank you.
Well go maybe you can start or take this whole question.
Hey, good morning FICO here.
Let's start with the with the reimbursement question I think our revenue beat was largely driven by at the space. As you noted we commented on the improvement in reimbursement rates.
Medicare was this was a strong example of that you've also seen some some increased success rates in other areas as well for instance, when you look at.
Vijay Kumar: And then on the financial side, you know, on the revenue beat, the main drivers here, it seems, like the U.S. reimbursement, revenue per patient per month, that's stepped up, and clearly active patients continue to grow plus 20%. So, on the U.S. reimbursement side, are you seeing any step up in commercial reimbursement rates or, you know, percentage of lives covered? I'm curious what's driving that. On the active patient side, as compliance rates improve, should we now just be looking at, you know, strong double-digit active patient growth for the foreseeable future? Thank you.
Penetration sorry.
When you look at the at the approval rates on the commercial business in the United States piece, I mean, there as well not necessarily on number of patients collection, but then.
Successfully claiming and having a higher success rate in approved played so overall very satisfied with how that is I thought it is developing and the impact of course that it has on our topline and and op margins.
With respect to continue to at the patient growth.
And you've seen over the last number of quarters that the patient growth is one of the stable factors in in our business and the second quarter will show the little bit stronger patient ROE. So it's not completely linear but we we do expect to continue to grow incrementally.
Wilco Gronheisen: Well, maybe you can start or take the full question.
Wilco Gronheisen: Let's start with the reimbursement question. I think our revenue beat was largely driven by active patients, as you noted. We commented on the improvement in reimbursement rates, and Medicare was a strong example of that.
And what we benefited from the past and perhaps still a little bit, but it's going to become less significant is that shift that mix shift that we saw in prior year from.
Wilco Gronheisen: We've also seen some increased success rates in other areas as well. For instance, when you look at penetration, sorry, When you look at the at the approval rates on the commercial business in the United States, we see some improvement there as well, not necessarily on a per patient collection, but in, Successfully claiming and having a higher success rate in approved claims. So overall, we're very satisfied with how that is developing and the impact of course that it has on our top line and in our margins. With respect to continued active patient growth, you've seen over the last number of quarters that the patient growth is one of the stable factors in our business and the second quarter will show a little bit stronger patient growth, so it's not completely linear, but we do expect to continue to grow incrementally and what we've benefited from in the past and perhaps still a little bit, but it's going to become less significant is that shift, that makes shift that we saw in prior year from the first quarter.
Recurrent GBM in newly diagnosed GBM.
Gotcha, Thanks, guys.
Thanks BJ [noise].
Thank you. Our next question comes from the line of Jason bed now with Piper Sandler Your line is now open.
Good morning, everyone. Thanks for taking the questions and congrats on a real nice quarter here Bill I wanted to start with you I don't want to get too far ahead of ourselves here, but the way described that valued in the commercial path for the high intensity or raise after completing the phase two study can you maybe expand maybe there and what the pads that are possible that you.
I see as you sit here today.
Yeah. So Jason this is an area, where we don't want to get too far.
And.
What we're really focused on number one is is completing this first trial you have 33.
[music].
We are also very focused and I'm personally very optimistic about some of the design that we have in the pipeline and again I think we showed you that we can get something from.
The design table into the clinic pretty deliberately here I think that has a lots to do with assays are inherent safety profile.
Wilco Gronheisen: recurrent GBM, and family-diagnosed GBM. Gotcha. Thanks, guys.
And.
Jason M. Bednar: Thanks, PJ.
So.
We are in Tuesday, I stick about the high intensity prospects here, but we're we're we're a little too early to give you the pathway into into commercial use.
Jason M. Bednar: Thanks, Vijay.
Jason M. Bednar: Thank you. Our next question comes from the line of Jason Bednar with Piper Sandler. Your line is now open. Good morning, everyone. Thanks for taking the question.
Okay understood that's helpful.
Maybe then just a couple international items I'm just wondering if you can offer any insight into how inventory maybe as being medicines I lab slogan idea, maybe the revenue contribution from royalties versus product sales and then how should we think about no but curious plans to move beyond the pending France entry into other European markets over the next couple of years. Thanks.
Jason M. Bednar: Questions and congrats on a really nice quarter here.
Jason M. Bednar: Bill, I wanted to start with you.
Jason M. Bednar: I don't want to get too far ahead of ourselves here, but the way you describe the value of the commercial path for the high-intensity arrays after completing the Phase II study is very interesting.
Jason M. Bednar: Can you maybe expand, maybe there, on what the paths are that are possible that you see as you sit here today?
William F. Doyle: What we're really focused on, number one, is completing this first trial, EF33. We're also very focused, and I'm personally very optimistic about some of the designs that we have in the pipeline. And again, I think you know, we showed you that we could get something from the design table into the clinic pretty deliberately here. I think that has a lot to do with our inherent safety profile. And so we're... Okay, understood.
Okay. So there's a lot there and I'm going to maybe ask wilco and protest to contribute but I I'll make the first comment that xylem is our partner in China.
We have found the partnership to have lived up to all of our expectations and more it's been a.
Terrifically professional organization with which to work.
That said.
They're responsible for the commercial.
Jason M. Bednar: Novocures plans to move beyond the pending French entry into other European markets over the next couple of years?
Execution in China, and they will report the the detail, but well I don't know if you have any comments on inventory and.
William F. Doyle: Thanks. Okay, so there's a lot there, and I'm going to maybe ask Wilco and Pritesh to contribute. But I'll make the first comment that Xilab is our partner in China; we have found the partnership, and it has lived up to all of our expectations and more. It's been a terrifically professional organization with which to work. That said, they're responsible for the commercial execution in China, and they will report the details. But Wilco, I don't know if you have any comments on inventory, and that might be helpful. And then, Pritesh, you can talk about the European expansion.
That.
Might be helpful. And then protests you can talk about Europe expansion.
Yes. Thank you Bill, let's let's let's start with a three components of revenue for was I and we expect those components could go to increase in the in the future of course with the with the approval in China. One component is the sale of equipment too.
Yes, I and the other important component our royalties their office a milestone payments that we amortize over time, so that's a relatively state.
Amounts with the sale of equipment that royalties is perhaps something I'd like to elaborate on for a few seconds food. If you like so first of all the sale of equipment.
Wilco Gronheisen: Yeah, thank you, Bill. Let's start with the three components of revenue for ZAI. And we expect those components to increase in the future, of course, with the approval in China. One component is the sale of equipment to ZAI. And the other important component is royalties. There are also some milestone payments that we amortize over time. So that's a relatively stable amount.
Is.
Essentially at cost so back to what question, Larry as little while ago, while we feel very good about the.
The gross margin developing it'll apart.
Take GBM, our old man its commercial business, there will be some impact and the sale of equipment through a margin go in there going forward because it's fair to zero margin, it's offset.
But at a somewhat later date by royalties at 100% margin. So we expect of course, a net benefit coming from that but it may have a bit off one of them and have an impact on our cost I don't think it's material.
But if it is material for conditional to run it would be you signed with great success in a commercial launch and.
Wilco Gronheisen: But the sale of equipment and royalties is perhaps something I'd like to elaborate on for a few seconds, if you like. So first of all, the sale of equipment is, basically, at cost. So back to a question Larry asked a little while ago, while we feel very good about the gross margin developing and all of our GBM, our own managed commercial business, there will be some impact on the sale of equipment at a margin going forward because it's at a zero margin. It's offset, but at a somewhat later date, by royalties at 100% margin, so we expect, of course, a net benefit coming from that, but it I don't think it's material, but if it is material in the short run, it would be a sign of great success for a commercial launch in China.
And.
So we feel good about that.
That's.
Opportunity and the success that Sony has in obtaining the VB approval, which will have a minor I think impact on.
Inventory of course, we have to make sure that we can supply side with inventory, but we've been successfully managing inventory successfully and EPS at acceptable levels over the years and I don't think side will be an exception to that.
Great and thank you I'll I'll pick up on the international question. So as we've shared before one of our levers for growth is geographical expansion and we're continuing on this path forward. The benefit we have right now in essence is we can use the GBM franchise and expand beyond where we are.
Today in other European geographies and as you heard from a soft opening remarks with depending CE Mark for me that the Leo My bet offers up another opportunity for expansion in the you're in European markets and we had shared with you before also our work in France, and that's where we're focusing right now it's one of the big.
Wilco Gronheisen: So we feel good about that opportunity and the success that Xi will have in obtaining the approval. It will have a minor, I think, impact on inventory. Of course, we have to make sure that we can supply Xi with inventory, but we've been successful in managing inventory successfully and at acceptable levels over the years, and I don't think Xi will be an exception to that.
You five countries and we're making progress on that front.
Wilco Gronheisen: Great. And thank you, Wilco.
Thanks for test thanks all.
<unk>.
Pritesh Shah: And I'll pick up on the international questions. As we've shared before, one of our levers for growth is geographical expansion, and we're continuing on this path forward. The benefit we have right now, in essence, is we can use the GBM franchise and expand beyond where we are today in other European geographies. And, as you heard from Asaf's opening remarks, with the pending CE mark for Mesothelioma, that offers up another opportunity for expansion in European markets. And we've shared with you before our work in France. That's where we're focusing right now. It's one of the big EU5 countries, and we're making progress on that front.
Wind up this topic, it and I was remiss for not mentioning it.
So much happened in this quarter and with that so busy managing in this environment that.
We received approval.
For newly diagnosed and recurrent GBM in greater China, the largest market in terms of patient.
Population.
On the strength of our international data.
So again, I think everyone, who is really a China.
China student knows that.
International therapy is coming into China.
I will always require a Chinese bridging study.
Pritesh Shah: Thanks for catching up, and winding up this topic, and I was remiss for not mentioning it. So much happened in this quarter, and we've been so busy managing in this environment that we received approval for newly diagnosed and recurrent GVM in greater China, the largest market in terms of patient population, on the strength of our international data. So again, I think everyone who's really a China student knows that international therapies coming into China almost always require a Chinese bridging study, and that can add as much as a decade to the time of availability. And so I wanna thank our team and the Xi team for this really extraordinary achievement. It's a testament to Novocure that it kind of falls onto the second page of a quarter with other achievements.
And that can add as much as a decade, so at the time of availability.
And so I want to thank our team.
And as I team for this really extraordinary achieve its a testament to navitaire that kind of hold on to the second page in a quarter with other other achievement.
Operator, you want to yes next question.
Thank you. Our next question comes on the line of the say Yang with Mizuho Group. Your line is now open.
Hi, good morning, and thanks for taking my questions congratulations on the quake quarter.
Just a couple of questions first of all on the picture that Wow.
We think about the could true cut to the.
Relative to the Luna Wow and standard like me a trial may read out earlier than Luna and how should we think about the path forward from there.
Operator: Operator, do you want to tie up the next question? Thank you. Our next question comes from the line of Defea Yang from Mizohu Group.
Defea Yang: Your line is now open. Hi, good morning, and thanks for taking my questions. Congratulations on a great quarter. Just a couple of questions. First of all, on the Kachouda trial,
Sure. So a good morning keep a cookie here from you on so I think.
There's a number of of things to take away from the the launch or the announcement at the 33.
Defea Yang: How should we think about the Kachurda trial relative to the Lunar trial? And something like it may read out earlier than Lunar, and how should we think about the path forward from there?
First and foremost I think.
It's a an indication of the broad applicability of tumor treating field therapy. So as we've said.
William F. Doyle: Sure. So, good morning, D-Pay.
Therapy does not depend on a specific gene marker it does not depend on a specific stage.
William F. Doyle: It's good to hear from you. So, I think there are a number of things to take away from the launch or the announcement of EF33. First and foremost, I think it's an indication of the broad applicability of tumor treating fields therapy. As we've said, our therapy does not depend on a specific gene marker. It does not depend on a specific stage. We believe that we can treat all solid tumor cancers that we can deliver to which we can deliver the fields, which is essentially all of them. And this is an indication of going into a different subset of what is the largest market. So Lunar is a trial in second line, stage four non-small cell lung cancer. Of course, EF33 is on the first line. You're right, it may very well read out; we expect it to read out earlier, but
We believe that we can treat.
All solid tumor cancers.
That we can deliver to which we can deliver the fields, which is essentially all the what cancers.
And this is.
An indication of going into a different subset of what is the largest market. So lunar.
Is that a trial in.
Second line.
Stage for non small cell lung cancer course.
Yes, 33 is in first line.
You're right it may very well read out.
We expect it to read out earlier, but this is.
William F. Doyle: This is
William F. Doyle: How we will build out our global non-small cell lung cancer franchise across lines across indications
How we will build out our global non small cell lung cancer franchise across lines cost across indications.
Okay. Thank you.
Defea Yang: Okay, thank you, Bill. Then a separate question on the MyLink program. It was launched in early June. I'm curious as of now if there are any early experiences or early data points that you could share with us.
Yes separate question the Mylink program, which launched early June I'm curious as of now if there's any early rins are deep data points that you could share with them.
Pritesh Shah: Yeah, Pritesh, why don't you talk about MyLink and how it's going?
Yeah for test why don't you talked about Mylink has how its going.
Pritesh Shah: Sure, thank you for that question. As we have shared, MyLink is a device that we have launched to help patients keep track of their usage. So before the exchange of the device, usage was tracked either through the tracking of the usage of the device, or we had to swap out the equipment, and with MyLink, patients are now empowered to do that, so we can keep a better track of usage. So we did it. We launched an initial pilot in the US. We have about 80 units out, and the early pilot results are allowing us to understand first of all that patients are able to do this successfully, and with that confidence, we will continue on with the rollout pathway in the US and also look to bring MyLink into other geographies.
Sure. Thank you for that question. So as we had shared my link is a.
Device that we have launched to help patients keep track of the usage. So before the exchange of the device. So.
Usage was track either through their tracking of the usage of the device or we had to swap out the equipment and with Mylink patients are now empowered to do that so we can keep.
Better track of usage. So we did we launched an initial pilot in the U.S., we have about 80 units out and the early pilot results are.
Allowing us to understand first of all the patients are able to do this successfully and with that confidence we will continue on with that rollout pathway in the U.S. and also look to bring forward mylink into other geographies.
Corey Kasimov: Thank you. Our next question comes from the line of Corey Kasimov with JP Morgan. Your line is now open. Hey, thank you for taking my question. This is Turner on behalf of Corey.
Thank you.
Thank you. Our next question comes from the line of Cory Kasimov with JP Morgan. Your line is now open.
Hey, Thank you for taking my question. This is Turner on Powercore I'm just want me to provide some additional color are detailed on the terms of your collaboration with Merck for the combo study I'm just anything from financial terms too.
Corey Kasimov: I'm just hoping you can provide some additional color or details on the terms of your collaboration with Merck for the combo study. Just anything from financial terms to, you know, who's going to be kind of leading the trial will be helpful. Thanks.
Who is going to be leading the trial will be helpful. Thanks.
Sure so.
William F. Doyle: Sure, so we have not disclosed the financial terms. What we can say is that the development of the trial protocol was a collaborative activity. We have worked very closely with them, and we will execute the trial, and then we will share the data and determine the next steps forward. We are really excited to work with the team, perhaps the best oncology team in the world, that's clear from collaborating with them, and they are also clearly the leader in non-small cell lung cancer. So we look at this as a tremendous opportunity.
We have not disclosed the financial terms.
What we can say is that.
The development of the trial protocol.
Was a collaborative activity, we worked very closely with them.
We will execute a the trial.
And then we will share the data.
And and determine next steps forward.
We're really excited to work with the team it's.
Let's face it it's.
The best.
Perhaps oncology theme in the world.
Clear in collaborating with them.
And they are also clearly the leader in non small cell lung cancer. So we look at this is a tremendous opportunity for tumor treating fields.
Corey Kasimov: Got it. And just on scripts, I know you posted negative Porter-Clover RX growth in the U.S. and Japan, but I'm curious what you're seeing in the EMEA that's driving growth. Are there any differences in underlying position script patterns between the two different geographies?
Got it and just on scripts.
Hi, good negative quarter, Coover Rx growth in U.S. in Japan, but.
But I'm curious where you're seeing in the M&A, that's driving growth are there any differences and underlying position script patterns between different geographies.
William F. Doyle: So I'll turn this over to Pritesh, but the one thing I would say is, because I've been getting this kind of question now since we launched in 2015, that the scripts for GBM do, in GBM, because it's a relatively infrequent disease, and the numbers of patients that go into one hospital one quarter and another hospital in another quarter do vary, that we have seen those ebbs and flows. I mean, a couple of quarters ago, you'll remember that Germany had ebbed in the wrong direction. At the same time, the U.S. had flowed in a positive direction. So we focus on patients on therapy and, of course, try to drive revenue for therapy.
So I'll turn this over to protest, but the one thing I would say is because I've been getting this kind of question now since we launched in 2015.
But the scripts do in GBS, because it's a relatively infrequent disease and and the numbers of patients to go into one hospital, one quarter and another hospital in another quarter do vary.
But we have seen those ebbs and flows I mean, a couple of quarters ago, you'll remember that Germany was.
Had abd in the wrong direction.
At the same time, the U.S. had slowed.
In the in a positive direction. So works, we focus on patients on therapy and of course trying to drive the.
Revenue per therapies, we do of course focus on scripts. We think there are many many more patients and all of our geography, who can benefit and are currently on the therapy I go back to the fact that were not limited by a particular genetic marker or a particular phenotype.
William F. Doyle: Of course, focus on scripts. We think there are many, many more patients in all of our geographies who can benefit than are currently on the therapy. I go back to the fact that we're not limited by a particular genetic marker or a particular phenotype. We are limited by education, and sometimes we're limited by the patients who walk in the door. But Pritesh, maybe you can give a little more color on the quarter.
We are limited by education, and sometimes we're limited by the patients who walk in the doors.
The protest maybe you can give a little more color on the quarter.
Pritesh Shah: Sure, so thank you Bill and thank you for the question. So I will start off with the sustained commercial momentum that we experienced this quarter despite the COVID impact and what we experienced here. What you see are our typical ebbs and flows in our patient volume. Despite that, what we're proud of are the 3,300 active patients in Q2 and the growth that we see there, and we will continue to focus on generating demand because that is one of our lead indicators that we focus on that predicates success on the number of active patients and subsequent revenue.
Sure. So thank you Bill and thank you for the question. So I will start off with the sustained commercial momentum that we experienced this quarter. Despite the cobot impact and what we experienced here, which you see our typical ebbs and flow in or patient volume.
Despite that what we're proud of our that 3300 active patients in Q2 and the growth that we see there and we will continue to focus on generating demand because that is a one of our lead indicators that we focus on that predicate success on the number of active patients and subsequent revenue.
Thank you.
William F. Doyle: Thank you. This concludes today's question and answer session. I would now like to turn the call back to Bill Doyle for his closing remarks.
This concludes today's question and answer session I would now like turn the call back to Bill Doyle for closing remarks.
William F. Doyle: Thank you. I want to pick up on the same theme that Asaf mentioned during his prepared remarks.
Thank you.
I want to pick up on the same theme that a soft mentioned during the prepared remarks.
William F. Doyle: These are clearly unprecedented times. They're unprecedented for all of us. But I have to commend the Novocure organization and team for their performance during these times. I think it's an absolute testament to their dedication to serve our patients, whether on the front line by ensuring that they have their therapy, serving our clinical trial patients and preparing to treat more patients with additional cancers in the future, or in our research and development organizations that are improving our therapies.
These are clearly unprecedented times their unprecedented for all of us.
But I have to commend the Novocure organization team.
For.
Their performance during these times I think it's an absolute testament to their dedication to serve our patience.
And serve them whether on the front line by ensuring that they have their therapy.
Serving.
Pinnacle trial patients and preparing to treat more patients with additional cancers in the future.
Or in our research and development organizations that are improving our therapy. So that it is even more effective.
William F. Doyle: so that it is even more effective in the near term. Very difficult. Many of our offices are closed. People are working from home. That's not always easy.
The near term, it's very difficult of many of our offices are closed some people are working from home.
It's not always easy.
William F. Doyle: And so I just have to express my personal profound thanks and appreciation for our I also thank everyone on the call for their interest in Novocure, and now we'll get back to work.
And so I just have to.
Express my personal profound.
Thanks, and appreciation for our team I also think everyone on the call their interest and overture.
And now we'll we'll get back to work. Thank you.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. BF-WATCH TV 2021
Thank you ladies and gentlemen, this concludes today's conference call. Thank.
Thank you for your participation you may now disconnect.
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